Study Makes Case that Oil, Gas Taxes Would Hurt the Economy

A study to be released on Tuesday says that President Barack Obama’s plans to raise taxes on the oil and gas industry might actually make the government’s fiscal straits worse, not better.

The study by an Louisiana State University finance professor, Joseph Mason, concludes that a couple of the administration’s proposals – projected to raise about $29 billion over the next decade – actually would cause long-term net losses of about $54 billion in tax revenues, because of impacts on the industry. The change “comes at the expense of industry cutbacks that can reasonably be expected to cost the economy some $341 billion in economic output, 155,000 jobs, [and] $68 billion wages,” the study says. The accompanying drain on tax revenues would actually outweigh the increase from changing the rules, the study contends.

The study was prepared with support from the American Energy Alliance, a market-oriented advocacy group that favors “freely functioning energy markets” and predictable, technology-neutral government policies. It suggests that easing federal restrictions on offshore drilling could have a much more beneficial effect.

The two tax provisions involved in the study are among the larger ones that Mr. Obama has proposed for the oil and gas industry. They include a domestic manufacturing deduction as well as a provision that can help oil companies reduce their U.S. tax when they pay taxes to foreign oil-producing countries, the administration says…